President Donald Trump gave a speech Wednesday in Missouri, on the subject of tax reform. True to form, it was light on details and contained almost no actual numbers. The entire speech was designed to repackage “trickle-down economics” one more time, and sell it as “populism” to the people who voted for Trump. It remains to be seen how effective this will be, but at least Trump is making the attempt to sell one of his agenda items directly to the populace ― something that was noticeably absent in the fight over repealing and replacing Obamacare. Maybe this time will be different, Team Trump seems to be calculating. Maybe Trump will be able to sell the tired old GOP idea of “giving your boss a big huge tax cut and hoping, maybe, some shred of it will eventually trickle down to you” to his voters. Republicans seem to have an endless capacity for believing this (and an equally infinite capacity to ignore all the other times when it didn’t work out as well for the middle class as promised), so perhaps Trump can get his voters excited about slashing corporate tax rates this time around, too.
Donald Trump campaigned quite differently, of course. Remember when he was promising to raise taxes on hedge fund managers? Yeah, those were the days. But because Trump has no real tax reform plan of his own, he seems more than willing to sign anything Paul Ryan and Mitch McConnell put in front of him ― which will (of course) wind up being the standard GOP trickle-down flim-flam that has animated the party since the days of Ronald Reagan.
This time around, the GOP “tax reform” flim-flammery has already ramped up, even though few are paying attention. The original plan was supposed to go something like this: repeal and replace Obamacare quickly, then immediately move to comprehensive tax reform and get it done before the August congressional break. Obviously, things have not worked out according to this plan. The failed obsession with destroying health care for millions of Americans took up a whole lot of time, and thus pushed tax reform right off the calendar. And when Congress returns to work next month, they’ll have a whole lot of must-pass items with built-in deadlines to deal with ― before they even get around to changing the tax code to benefit millionaires. Since it’s already looking like the Republican Congress is going to punt on creating a full budget for next year, this means that they’ll probably be busy squabbling about budget items from now until Christmas. This leaves little available time or attention to dealing with the tax code.
But the flim-flammery doesn’t end with the calendar. The original plan was to redistribute the tax burden shared by all American workers, wealthy capitalists, and big business. Guess who will get the most goodies in that plan? This redistribution plan has a name: “revenue-neutral tax reform.” What this is supposed to mean is that after the reforms are put in place, the federal government will get exactly the same tax revenues as before. This is kind of pointless, as you can see, but that was indeed the plan. Instead of X amount of tax revenue from all the workers, Y amount of dollars from capital gains, and Z amount of dollars from corporate taxes, these amounts and ratios will be shuffled ― a clear case of redistribution of wealth ― but the total collected by the federal government would theoretically remain the same.
If the current rumors from Congress are to be believed, this grand scheme has already been chucked out the window. When taxes are cut, to remain “revenue-neutral” means having to raise taxes elsewhere to make up the difference. This would be done (according to Republicans, including Trump) by “closing loopholes used by special interests.” Except that the “loopholes” they were eyeing to “close” were hardly for “special interests,” but instead were things like the deduction for state income taxes and the mortgage interest deduction, both of which are used by millions of middle-class families each and every year. All so Republicans could slash corporate tax rates, of course.
Republicans are already shying away from making such tough choices, because they are terrified of the backlash such proposals would generate from voters. Instead, they’ve (once again) talked themselves into an “all candy, no vegetables” version of reforming taxes. You can’t even really call it “tax reform” anymore, because what they’re contemplating is instead just massive tax cuts, across the board. Throw the middle class a bone or two and then get about the serious business of drastically reducing taxes for rich people and Wall Street, in other words.
The problem with just cutting taxes without any attempt at reforming the tax code (cutting all those supposed special-interest loopholes) is that it will blow a multi-trillion-dollar hole in the budget. Less tax money coming in means higher deficits, year after year. It’s an inescapable fact. This is one of the reasons why the Republican tax-cutting efforts are stalled, because the Tea Partiers are balking at piling trillions on the national debt just to give big tax bonuses to the ultra-wealthy. So it may be impossible for the Republican caucus to agree on any plan of this nature, which would pretty much kill its chances for passage (since Democrats aren’t going to vote for such bills, either).
It’s an open question whether Trump’s White House will continue to push hard for tax reform this year. Although he gave a speech today, this doesn’t mean he’ll be hitting this theme with such effectiveness that his voters begin to pressure their own members of Congress to follow through. Trump is, after all, pretty easily distracted.
But then again, a Republican tax cut bill would almost guarantee Trump himself will get enormous tax cuts for the next decade, so perhaps his own personal interest will keep him focused. This is where Trump’s personal flim-flammery on the subject really still needs exposing by the media. Because rather than closing “loopholes for special interests,” what Trump has already proposed is in fact completely removing the biggest check on the use of such loopholes. And it’s a pretty sure bet this will remain high on his tax-cutting agenda throughout the process, because one change to the tax code could save him a whopping four-fifths of his own tax bill ― to the tune of over $30 million in one year alone.
I wrote about this back in April, a few weeks after Tax Day. Because while Trump’s one-page tax reform proposal (which was all of 200 words long) had a glaring item which would have saved the president more than 80 percent of his taxes on the only recent tax year for which we’ve seen data from Trump ― the one that was leaked to the press. When you look at Trump’s 2005 Form 1040, this is glaringly obvious, even if virtually everyone in the media has yet to notice it yet. As I explained back then:
Without taking into account things like penalties and interest, Trump paid an impressive total of $38,435,451 in federal taxes in 2005. Of that total, only $5,310,616 was entered on the line most people figure their taxes on (Line 44). But a whopping $31,261,179 of the total taxes Trump paid was for the Alternative Minimum Tax ― which he is now proposing to abolish. Divide it out, and Trump’s Alternative Minimum Tax was 81.3 percent of his total taxes.
That’s a pretty easy division to do. It took me about five minutes, four of which was spent digging out the copy of Trump’s taxes I had downloaded and saved (for future reference). It is, in fact, the most obvious way his own taxes would be impacted by his proposed changes to the tax system.
Trump made over $150 million ($151,794,067) in total gross income in 2005. Hearing he paid $38 million in taxes led many people to think: “That’s a reasonable amount of taxes on that income.” Indeed, Trump was paying a higher tax rate than Mitt Romney had paid (we know this, because Romney did partially release his own taxes).
But what would people have thought if the total tax Trump paid on $152 million was only $7,174,272? That is an effective tax rate of only 4.7 percent, folks ― instead of the 25.3 percent Trump actually paid. With one single change to the tax code, Trump would have saved himself 81 percent of his 2005 tax bill.
The entire purpose of the Alternative Minimum Tax is to ensure that nobody takes too many loopholes on their taxes. As I explained back in April:
The tax exists solely to prevent people with high-priced accountants and tax lawyers from gaming the tax system to reduce their own taxes to minimal amounts (like paying 4.7 percent). It is a correction that in essence says: “You have taken too many deductions and writeoffs, so let’s figure a more realistic amount of taxes for you to pay.” Which is why rich folks hate it so much.
This makes it the easiest way to spot Republican flim-flammery. Will Congress contemplate cutting Donald Trump’s taxes by over 80 percent? Trump is not alone in the percentage of income taxes paid due to the Alternative Minimum Tax ― plenty of other very wealthy people are also caught by this tax adjustment, which (again) was intended to make it impossible for any one taxpayer to take far too many writeoffs (or “loopholes,” as the politicians say). In fact, if Congress (and Trump) were really serious about limiting the loopholes, then they’d be instead arguing to increase and maximize the Alternative Minimum Tax.
They won’t be doing any such thing, of course. Which is why it’s not only the easiest way to see how Trump’s tax plan would affect his own personal finances (it’s a quick division between two numbers on the only recent tax form from Trump that’s been made public, after all), but it’ll also be the easiest way to disprove the Republican flim-flammery on their tax reform ideas. If any of them propose eliminating (or even reducing) the Alternative Minimum Tax, then they are working to make the tax code more generous to the wealthiest taxpayers. They will be trying to redistribute that tax burden on the backs of the rest of us, plain and simple. They’ll be giving Donald Trump an extra $30 million a year, so he can pay less than five percent of his income to the government. When you keep that in mind, the flim-flammery becomes painfully obvious.
Chris Weigant blogs at www.chrisweigant.com
Follow Chris on Twitter: @ChrisWeigant
Source: Huffington Post Politics